This Week in Illinois

TAXES 

House Republicans File Resolution Opposing Gov. Pritzker’s Unfair Tax.  This week, Illinois House Republicans filed House Resolution 153, which states unified opposition to Governor Pritzker’s plan to tax small businesses and middle-class families out of the state through the implementation of a graduated income tax – an “Unfair Tax”. 

“Illinoisans cannot afford another income tax increase and we cannot afford a system that allows politicians to play with rates and brackets just to fill budget holes,” said Assistant Republican Leader Avery Bourne. “A graduated income tax will inevitably bring a tax increase on a majority of Illinoisans and will hurt small businesses – making us even less competitive with our surrounding states. I’m proud to stand in opposition to Governor Pritzker’s proposed tax increase.”

“The Democrats and Governor Pritzker are yet again proposing an intellectually lazy solution to a very serious fiscal problem,” said Assistant Republican Leader Grant Wehrli. “When we should be working collaboratively to grow the economy and create new revenue through job growth, the majority party just wants to continually look for more ways to raise taxes.”

This spring, Democrats will begin the process to receive voter approval to change the state Constitution to move Illinois from a flat tax to a graduated tax. This would remove an important protection for taxpayers while handing over a blank check to the government.

Last year, a House Democrat sponsored HB 3522, which sought to impose a graduated income tax. Under this plan, the Commission on Government Forecasting and Accountability revealed that 77 percent of Illinois taxpayers would see an increase in their income tax liability for a total of over $5.2 billion in new taxes.

“Illinois families already pay the highest overall tax burden of any state in the Midwest, and among the highest in the nation,” said Assistant Republican Leader Keith Wheeler. “Enacting a Graduated Income Tax, with rates set by politicians in Springfield who would have the ability to increase them at will, would result in a tax hike on middle-income families and hasten the exodus of jobs and opportunity out of Illinois.”

“We have huge, systemic problems in Illinois, and these continual tax increases are not the solution,” said Deputy House Minority Leader Tom Demmer. “Raising taxes didn’t work in 2011 and it didn’t work in 2015. We need to enact policies that grow the economy and create jobs. A pro-jobs agenda, coupled with fiscal restraint, will put Illinois back onto a path toward financial stability.”

“Proponents of this tax are misleading themselves and the public if they think changing the Illinois tax system this dramatically will only affect the very wealthy,” said Assistant Republican Leader Michael McAuliffe. “As in other states, this tax will ultimately mean an increase on the middle class and even those below. Seniors and others living on a fixed income cannot handle yet another tax hit from a government that cannot live within its means.”

“With all of the new promises and increased spending by the majority party, this will be a tax increase on the majority of Illinoisans who are the middle class of our state,” said Assistant Republican Leader C.D. Davidsmeyer.

“It’s clear from the projections coming out of the Pritzker administration that a graduated tax will lead to increased taxes on middle class families across the state to generate the revenues they claim are needed,” said Republican Conference Chairman Tim Butler. “We have lost 700,000 residents in the past decade because of Illinois’ crushing tax burden and the signing of Senate Bill 1 into law last week means we are certain to lose more job creators and those they employ. To increase the cost to get by in Illinois even more is only going make this problem worse. We simply cannot afford this ‘unfair tax’ increase.”

BUDGET

Fitch Ratings, Standard & Poor’s respond negatively to Pritzker budget proposal. Only one week after Governor Pritzker presented a FY20 budget plan to the Illinois General Assembly, the plan got a thumb’s down rating from two of the “Big Three” credit-monitoring agencies that oversee U.S. debts.  Fitch Ratings and Standard & Poor’s Global Ratings (“S&P”) both characterized the Governor’s budget proposal as imprudent and unlikely to persuade them to raise Illinois’ troubled credit rating.  Illinois has the worst credit score of any of the 50 states, ranked only one or two notches above “junk bond” status. 

In explaining their negative judgements, both credit-rating entities pointed to the Pritzker budget’s dependence on temporary, one-time-only budget fixes.  Examples of these non-repeatable acts of budget magic include the sale of the James R. Thompson Center, the sale of licenses to offer sports betting books, and the sale of licenses to sell marijuana.  All three of these moves are supposed to bring in millions of dollars to cover the FY20 version of what has become the State of Illinois’ annual structural “budget hole,” the moneys required to cover annual exponential increases in the costs of Medicaid, public-sector pensions, and other mandated expense items.  However, even assuming the Pritzker budget is enacted, after FY20 ends the “budget hole” will stretch on and the money will no longer be there. 

S&P called the Pritzker budget “dubious” and said enacting it could ”weaken the state’s credit trajectory,” which is already at a junk-bond-skirting BBB- in the S&P credit-rating table. Fitch Ratings explicitly warned Illinois that enactment of the Pritzker budget will place the state in risk of a credit downgrade.  

A third major credit-rating office, Moody’s Investors Service, has also ranked the State of Illinois only one notch above junk-bond level. The General Assembly has the constitutional duty of examining and scrutinizing the budget proposal submitted to it by Gov. Pritzker.    

House Appropriations Committees begin to meet, consider FY20 budget.  The General Assembly must pass a budget for the fiscal year beginning July 1, 2019.  A budget passed before June 1, 2019 will require only a simple majority (60 votes in the House) to pass.  The Appropriations Committees began meeting this week to hear budget requests and announcements of fiscal priorities from the various State departments.  

Springfield faces many challenges, and testimony indicates that the FY20 budget will be seen by many people as disappointing for a wide variety of ways.  It is possible that the Illinois House, led by the majority Democrats, could find itself looking at the enactment of significant new taxes.  It is also quite possible that even with one of the highest tax burdens borne by any state in the U.S., many advocates will say that Illinois is not spending enough money on their favorite issue area or program and is morally obligated to spend even more.  

The meetings of House Appropriations Committees are open to the public and are posted on the General Assembly committee website. Many of the committee meetings are held in rooms that are wired to present live audio or video feeds to the public through the General Assembly website.  In addition, users of the website can file slips of support or opposition to the budget bills and other bills before each committee.   

FIRST RESPONDERS

Illinois State Police announces initiative to up enforcement of “Move Over” law. The Illinois law, which requires motorists to change lanes when they see a parked first-responder vehicle on the side of a multi-lane highway with moving traffic, is obeyed by most motorists. Some drivers continue to zoom by parked police cars, even when they see their lights flashing.  The Illinois State Police (ISP) reports that ten of their squad cars have been hit by motorists so far in 2019.  A January 12, 2019 incident on a stretch of the Chicago-area I-294 led to the on-duty death of State Police Trooper Christopher Lambert.

The State Police, in cooperation with local law enforcement, have initiated a crackdown intended to increase enforcement of the “Move Over” law. Also known as “Scott’s Law,” this is a mandate on drivers to change lanes away from a parked roadside first-responder motor vehicle whenever this can be done safely and in line with traffic conditions.  If the driver cannot change lanes, the driver must slow down in order to pass the first responder at a safe rate of speed.   In this crackdown, a second police vehicle may park near, and just in front of, the first parked police vehicle.  If someone disobeys the law and zooms through the lane, they can expect to be pulled over.  

A violation of the “Move Over” law requires a mandatory court appearance, at which time the offender may face license suspension and a fine of up to $10,000. “Scott’s Law” is a tribute to Chicago Fire Dept. Lt. Scott Gillen, who was killed in December 2000 on the Bishop Ford Expressway while on duty.  Fallen Illinois first responders are remembered at the Illinois Police Memorial and at the Illinois Fire Memorial on the grounds of the Illinois State Capitol in Springfield.  In addition, a foundation closely affiliated with the Illinois State Police is in the final stages of completing a memorial garden for State Police officers on South Sixth Street in Springfield, adjacent to the ISP headquarters building.    

JOBS

Fiat Chrysler announces plan to eliminate 1,371 jobs in Belvidere.  The Belvidere Assembly Plant has escaped previous industry cutbacks, but was hit by current Fiat Chrysler plans to maintain and expand core assembly operations in southeastern Michigan.  The factory complex in far northern Illinois, near Rockford, will reduce its operations from three shifts to two shifts. Many of Fiat Chrysler’s popular “Jeep Cherokee” SUV vehicles are made in Belvidere.  The plant announcement was made on Tuesday, February 26.

Led by Rep. Joe Sosnowski, who represents the Belvidere plant and many of its workers, House Republicans pointed to the threat of higher income taxes and the burden of public-sector-mandated wage laws as disincentives for the private sector to invest in Illinois and create Illinois jobs.  “With the advent of the increased minimum wage and the other taxes being proposed, it makes it very difficult for job creators in Illinois,” Sosnowski said.  

LOCAL GOVERNMENT PENSIONS

COGFA reports on impact of local government pensions.  The Illinois Municipal Retirement Fund, the City of Chicago pension funds, and the Cook County pension funds are major obligations of the taxpayers of Illinois. The Commission on Government Forecasting and Accountability (COGFA), the General Assembly’s budget-watchdog arm, issued a report this week on these funds and their liabilities.  Together with a separate family of funds (not covered in this report) that underwrite pensions for Illinois’ Downstate police officers and firefighters, these funds constitute the non-State-managed side of the overall unfunded pension liability of Illinois.

Defined-benefit pension systems have been challenged in the 2010s by very low worldwide interest rates on prudent, pension-fund-worthy interest-bearing investments.  Many segments of the private sector have responded to these global economic conditions by phasing out defined-benefit pensions and encouraging their employees to invest in defined-contribution mutual funds with an emphasis on equity capital.  Illinois’ local governments, by contrast, are constrained by the terms of statutory law and the state Constitution in what they can do with respect to pension obligations owed to current employees and vested members of their pension funds.    

The unfunded liabilities of the eight Chicago-based pension funds covered in this February 2018 report is $41.8 billion.  The comparable figure for Cook County is $6.9 billion and the comparable figure for the Illinois Municipal Retirement Fund (non-Chicago, non-Cook County, non-police, and non-firefighting public employees in suburban and Downstate Illinois) is $3.0 billion.            

WOMEN’S HISTORY MONTH

Illinois House Republicans observe Women’s History Month.  The month-long period, which began on Friday, March 1, will commemorate the achievements of women throughout history.  Illinoisans have special reasons to join this commemoration because of the significant number of honorees with ties to Illinois.  For example, the first American woman to win the Nobel Peace Prize was Illinoisan Jane Addams. During session days in March 2019, House Republicans will work with their colleagues to carry out a daily program of observances and commemorations of Women’s History Month on the Illinois House floor.